A good column here. Excerpt as follows:
We’re not there yet, but if the Australian dollar stays high in the face of a weakening global economy, the RBA might first resort to “jawboning” markets through subtle expressions of concern about its value. The next step would be greater public display of currency intervention, which the RBA knows can have only limited effects.
But ultimately, if global interest rates continue falling, the RBA will face the delicate choice of potentially lowering interest rates by more than it would otherwise, or living with a higher than desirable exchange rate. In the face of low inflation and sluggish growth, more countries are seeking the benefits of a cheap currency. In doing so, it’s dragging down interest rates around the world and Australia may not be immune.
